Charity mindset curbs impact of philanthropic dollars, says expert

The charity mindset that persists in philanthropy keeps mediocre projects alive and shrinks the funding pool for projects that could have greater impact, according to a philanthropic investment adviser.

Ineffective or short-term development projects that do not measure their outcome are not being closed down because donors think charity alone is a good thing, said Doug Balfour, CEO of Geneva Global, a philanthropic consulting firm.

“Anywhere where there is more of a charity mindset, rather than a business or investment mindset, you tend to get average and mediocre [development] projects. This was true in particular in the US in the 1960s and 1970s,” said Balfour. “If they were a company, the organisations running those projects would go out of business.”

The move to strategic or venture philanthropy – which monitors and measures the impact of projects to guide philanthropic investments – has gained many well-known advocates, including the Bill & Melinda Gates Foundation and the US-based Rockefeller Foundation.

Still, the transition is not happening fast enough, according to Balfour, with many new donors beginning with funding for welfare programmes, such as orphanages.

“The Middle East is a place where people are incredibly generous,” said Balfour. “[But] what gets reported is what the project is, rather than the outcome from the project.” How people choose to give is starting to change as younger generations take over the reins of business and get more involved in philanthropy, said Balfour.

The Millennial generation – those born roughly between 1980 and 2000 – will amass $14 trillion by 2031 and will be the prime beneficiaries of a $30 trillion transfer of wealth between generations, according to management consultants Accenture.

“I see a major shift, often driven by business entrepreneurs who want to give in significant ways,” he said. “[They] bring business thinking [to their philanthropic investments] because they want to do it in their own lifetime. They aren’t waiting until the end of their life and then doing it as a legacy.”

There are eight guiding principles to effective philanthropy, according to Balfour, which he sets out in his book 'Doing Good Great'.

Donors are already comfortable with the concept of viewing giving as an investment, evaluating projects, and learning from their mistakes. Still, using local organisations to deliver projects, strategic planning and collaborating with others are still sorely lacking, according to Balfour.

US-based Geneva Global has helped launched several philanthropic investment funds, including The END Fund, to fight neglected tropical diseases, and the Freedom Fund, which takes aim at modern day slavery. The firm has managed more than $140m in grants since 1999.